The ASX enjoyed its ninth winning day closing up 1 per cent Wednesday. Photo: Rob Homer

The rally so far has lifted the ASX 200 more than 8 per cent since its December 15 nadir of just over 4909.

The index is now within 1.7 per cent of its position at the start of the year – 5411.

New Zealand also joined the party with the NZX 50 index hitting a fresh record high during intra-day trade on Wednesday.

All sectors were in the green, with energy, health, financial and consumer stocks leading the way forward. Even mining stocks recorded an overall gain, with the materials sector up 0.1 per cent, as iron ore and oil rose overnight.

"The market was oversold," he said. "At 5000 the market offers compelling value. Part of the sell-off in the middle of the year was due to sell-off in the Aussie dollar. But the Aussie dollar's been getting stronger and perhaps international investors coming back into Australian equities.

"Maybe an Australian dollar in the low 70s [US cents] is where the Aussie will find a floor.

"For Australian investors, the dividend yields are compelling and the Reserve Bank doesn't look like it will be raising rates any time soon."

Banks fuel the rally

Strong buying in banks had fuelled the rally he said, coupled with a good performance in retailing stocks as consumers opened their wallets over Christmas.

"The banks and big supermarkets have been key drivers of the year-end rally in the ASX 200," agreed CMC Markets chief market analyst Ric Spooner. "However, with stocks like CBA now up 11 per cent since mid-December, and Wesfarmers up 13 per cent, value is becoming less obvious."

Mr Spooner said the rally may not have much further to go.

"This year's Santa rally is doing what many of its predecessors have done. The stock market continues to push higher on thin volume and with no need for a macro catalyst. At the moment, the market is all about sentiment and perceived value.

"However, after substantial gains since mid-December, it would not surprise to see some caution returning to the market in the New Year."

IG market analyst Angus Nicholson said a close above 5411 on Thursday to end the year flat "may be a bit of a stretch".

The index would need to add almost 100 points in Thursday's half session, he said.

"However, a close above 5350 would be very respectable and see the index end the year at its highest level since August 19, hopefully putting the sub-5000 performances well behind it.

"Of course, while many have got the tiny violins out for the ASX this year due to its woeful nominal returns, the total return on the index is actually 4.6 per cent when one factors in dividend payouts – still better than putting your money in a term deposit for the year."

However, among blue-chip mining stocks, BHP was down 0.1 per cent to $18.09 and Rio Tinto fell 0.02 per cent to $44.78.

Telstra was up 1.4 per cent to $5.61.

Among the banks, ANZ was up 1.2 per cent to $27.96, Commonwealth Bank lifted 1.3 per cent to $85.57, National Australia Bank gained 1.4 per cent to $30.33 and Westpac 1.9 per cent to $33.66.

Woolworths and Wesfarmers continued their recent strong run on the back of Christmas spending, with the former adding 0.7 per cent to $25.02 and the latter 0.4 per cent to $41.97.

Other retailers also enjoyed gains, with JB HiFi lifting 1.8 per cent to $19.28, Myer gaining 1.2 per cent to $1.21, and Harvey Norman up 1.2 per cent to $4.28.